SINGLE
AUDIT OF THE
COMMONWEALTH OF PUERTO RICO
DEPARTMENT OF THE FAMILY
FOR THE FISCAL YEAR ENDED
JUNE 30, 2005

March
2008

A-77-08-00012

MANAGEMENT
ADVISORY REPORT

Mission

By conducting independent and objective audits, evaluations and investigations,
we inspire public confidence in the integrity and security of SSA's programs
and operations and protect them against fraud, waste and abuse. We provide timely,
useful and reliable information and advice to Administration officials, Congress
and the public.

Authority

The Inspector General Act created independent audit and investigative units,
called the Office of Inspector General (OIG). The mission of the OIG, as spelled
out in the Act, is to:

Conduct and supervise independent and objective audits and investigations
relating to agency programs and operations.
Promote economy, effectiveness, and efficiency within the agency.
Prevent and detect fraud, waste, and abuse in agency programs and operations.
Review and make recommendations regarding existing and proposed legislation
and regulations relating to agency programs and operations.
Keep the agency head and the Congress fully and currently informed of problems
in agency programs and operations.

To ensure objectivity, the IG Act empowers the IG with:

Independence to determine what reviews to perform.
Access to all information necessary for the reviews.
Authority to publish findings and recommendations based on the reviews.

Vision

We strive for continual improvement in SSA's programs, operations and management
by proactively seeking new ways to prevent and deter fraud, waste and abuse.
We commit to integrity and excellence by supporting an environment that provides
a valuable public service while encouraging employee development and retention
and fostering diversity and innovation.

MEMORANDUM

Date: March 28, 2008

To: Candace Skurnik
Director Audit Management and Liaison Staff

From: Inspector General

Subject: Management Advisory Report: Single Audit of the Commonwealth of Puerto
Rico, Department of the Family, for the Fiscal Year Ended June 30, 2005 (A-77-08-00012)

This report presents the Social Security Administration's (SSA) portion of
the single audit of the Commonwealth of Puerto Rico, Department of the Family
(PRDF), for the fiscal year (FY) ended June 30, 2005. Our objective was to report
internal control weaknesses, noncompliance issues, and unallowable costs identified
in the single audit to SSA for resolution action.

Torres Llompart, Sanchez Ruiz, LLP performed the audit. Results of the desk
review conducted by the United States Department of Agriculture (USDA) have
not been received. We will notify you when the results are received if USDA
determines the audit did not meet Federal requirements. In reporting the results
of the single audit, we relied entirely on the internal control and compliance
work performed by Torres Llompart, Sanchez Ruiz, LLP, and the reviews performed
by USDA. We conducted our review in accordance with the Quality Standards for
Inspections issued by the President's Council on Integrity and Efficiency.

For single audit purposes, the Office of Management and Budget assigns Federal
programs a Catalog of Federal Domestic Assistance (CFDA) number. SSA's Disability
Insurance (DI) and Supplemental Security Income (SSI) programs are identified
by CFDA number 96. SSA is responsible for resolving single audit findings reported
under this CFDA number.

The Puerto Rico Disability Determination Services (DDS) performs disability
determinations under SSA's DI and SSI programs in accordance with Federal regulations.
The DDS is reimbursed for 100 percent of allowable costs. The PRDF is the Puerto
Rico DDS' parent agency.

The single audit reported:

1. Documentation was missing from employees' personnel files and controls were
inadequate to ensure that employees whose salaries were charged to Federal funds
performed duties related to the program charged (Attachment A, Pages 1 through
5). The corrective plan indicates that a taskforce was organized to review all
personnel files and ensure documentation was complete (Attachment A, Page 6).

2. The PRDF did not adhere to the requirements for developing and maintaining
clearance patterns as specified in the Treasury-State Agreement. Specifically,
for the SSA programs, request for reimbursement was not made for 10 adjustments
totaling $1,553,196; and information related to the request for funds was not
available for the auditors to review for eight transactions totaling $1,205,214
(Attachment A, Pages 7 through 13). The corrective action plan indicates a reminder
was issued to maintain adequate documentation to support the requests for reimbursement
and improve internal controls over filing and safeguarding documents for requests
for reimbursement (Attachment A, Pages 14 and 15).

3. Expenditures totaling $408,296 were charged to the SSA program for obligations
that were incurred after the end of the period of availability (Attachment A,
Pages 16 through 20). The corrective action plan indicates that a new record
keeping system was implemented which will help improve accounting for obligations
(Attachment A, Pages 21 through 23).

4. Unliquidated obligations reported on the State Agency Report of Obligations
for SSA Disability Programs (SSA-4513) did not agree with the PRDF's accounting
records. Specifically, the SSA-4513 was understated by $1,334,861 (Attachment
A, Pages 24 and 25). A corrective action was not included in the report (Attachment
A, Page 26).

The Office of the Inspector General conducted an audit of Administrative Costs
Claimed by the Commonwealth of Puerto Rico Disability Determination Program
that covered the period of this single audit. The administrative cost audit
reviewed the areas where the single audit reported findings - personnel, cash
management, expenditures, and unliquidated obligations - and made recommendations
as appropriate. Therefore, we will not make recommendations on these single
audit findings.

The single audit also disclosed the following findings that may impact the
DDS' operations although they were not specifically identified to SSA. I am
bringing these matters to your attention as they represent potentially serious
service delivery and financial control problems for the Agency.

The lack of an overall control and record keeping system, including record
retention and filing of required documents, resulted in untimely reports and
inaccurate accounting records (Attachment B, Pages 1 through 5).

PFDF did not (a) have controls and procedures in place to document allowability
of expenditures, including administrative costs, (b) did not have the proper
reviews and authorizations for processing these expenditures, and (c) did not
separate administrative expenses (2) according to the proper program (Attachment
B, Pages 6 through 13).

Internal controls over equipment were inadequate and property records were
not provided (Attachment B, Pages 14 through 17).

Please send copies of the final Audit Clearance Document to Shannon Agee. If
you have any questions contact Shannon Agee at (816) 936 5590.